The capital of the UAE is emerging as the Gulf’s new boom city. It will change the face of the world.
Figures released at MEED’s Abu Dhabi conference on 10-11 November show that Abu Dhabi, the largest and richest of the seven emirates that make up the UAE, had a gross domestic product (GDP) of more than $100bn in 2007. Annual growth was 17 per cent and per capita GDP, at more than $70,000, was the second highest in the Middle East after Qatar.
It is likely that Abu Dhabi’s economy has grown at least another 10 per cent this year, although it will go into reverse in 2009 because of the sharp drop in oil prices since July. But there is no fear of insolvency. Government savings, most in the Abu Dhabi Investment Authority (Adia), are close to $1 trillion.
With 10 per cent of the world’s proven reserves and production in the summer hitting 2.5 million barrels a day (b/d), Abu Dhabi sits at world oil’s top table. Its long-term strategy, Vision 2030, which was published in 2007, is a declaration that the emirate is seeking a role in the global economy that extends well beyond the oil market.
Vision 2030 calls for Abu Dhabi to diversify by concentrating on areas where it has advantages, such as energy, and industries requiring large volumes of gas and logistics. It also builds on the emirate’s cultural aspirations.
The plan calls for the private sector and the market - not the government - to drive the economy forward. These same goals have been targeted by other oil-based economies. But Abu Dhabi has learned from their mistakes and sought the best advice. Its strategy has been care-fully studied and amounts to the most ambitious and coherent long-term development plan the world has ever seen.
Abu Dhabi’s wealth will have political implications. UK Prime Minister Gordon Brown visited the city at the end of October to ask the Abu Dhabi government to contribute to a new International Monetary Fund facility to help countries damaged by the credit crunch.
It is likely to co-operate, but it will expect to be consulted on how its money is used. The UAE can anticipate being engaged more frequently in issues affecting the Middle East.
As Abu Dhabi takes over more of the responsibility for ensuring the federation’s infrastructure is up to scratch, questions are likely to be asked about projects that appear to replicate each other. Guided by Abu Dhabi, a new era of UAE-wide economic planning is about to dawn.
This was reflected in the announcement on 12 October by UAE president and Abu Dhabi ruler Sheikh Khalifa bin Zayed al-Nahyan that the government would guarantee all deposits and savings with local banks. The guarantee, implicitly underwritten by Abu Dhabi’s wealth, was subsequently extended to international banks with major operations in the UAE. The federation finally has a banker of last resort.
Since then, the government has pumped more than AED20bn ($5.3bn) into the financial system in the form of short-term deposits to help banks lend.
These initiatives highlight the growing role of the federal government. It is poised to support further initiatives that will help advance the dream that inspired the creation of the UAE in December 1971. The future is rich with possibilities for the federation and its friends. But the key is Abu Dhabi, whose rise, long forecast, is now clearly visible.